Foreign companies have shown little interest in the purchase of shares in distribution companies in the Ukraine. Four companies which were offered for sale earlier in the year have failed to attract a single offer.
The Ukraine government, which offered stakes in AT Khmelnytskoblenergo, Volynoblenergo, Kirovohradoblenergo and Zakarpattyoblenergo, had intended to sell stakes in 14 of the county’s 25 electricity distributors this year. Those plans have now been derailed.
Foreign companies have said the Ukraine must change its privatization rules if it wants to attract outside investment.
Currently investors are being offered a chance to invest but no opportunity to take over management. Instead they are expected to take their chances with the existing management. This is unlikely to satisfy many potential investors.
Ukraine’s State Property Fund (SPF) has so far sold one 20 per cent stake in one distribution company, Ternopiloblenergo. The head of the SPF attributed part of the reason for the failure to sell stakes in any other distributors to a shortage of money within the country and an over-regulated tender process.
But there are severe problems within the electricity sector in the Ukraine. A chronic problem of non-payment has plunged many distribution companies into debt, and the legislation governing the sector is often contradictory.
The companies face other financial difficulties too because state tariffs only cover around 85 per cent of the cost of electricity. This situation has not been rectified in spite of pressure from both the World Bank and the International Monetary Fund.
The SPF is hoping for more success when it offers stakes in the country’s generating companies. Four are to be put on the market this year. However, the government intends to retain a 51 per cent share in each.